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The Changing Geographies of the Multinational Corporation.pdf

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McGill University
GEOG 216
Geraldine Akman

The Changing Geographies of the Multinational Corporation 12/5/12 12:48 AM 7.1 Introduction MNCs connect different places in increasing complex international divisions of labour. It is through MNCs organizational spaces that the more tangible and material economic geographies of the global economy are organized. Multinationals operate in more than one country but are geographically embedded in particular places. 7.2 The Changing Geography of FDI Traced to the 1960’s FDI: a measure of international flows of investment within firms The sotck of outward FDI from the period 1914- late 1970’s marks the decline of the UK and the rise of the US. US and the UK are the leading source countries for FDI. Old International Division of Labour: investment in developing counties for resource and raw material extraction Now there are greater investment flows between developed countries à FDI more linked to manufacturing plants (Western Europe) 7.3 Understanding the Emergence of the MNC Internationalize Setting up New Plant or Facilities Cheaper labour The acquisition of Existing Factories or Firms Risk sharing Reducing competition 7.3.1 Why do firms internationalize? The ultimate aim of realizing surplus value or profit Economies of scale Outgrowing the initial restrictions of a place “spatial fix” (Harvey) market access (accounts for the largest share of FDI) cheaper supplies Due to protectionism, Asian companies shifted to setting up overseas plants. 7.3.1 The New International Division of Labour Growing level of FDI linked to the search for cheaper labour à new international division of labour Higher level decision making would remain in the advanced regions Routine, production activities would be dispersed ‘a race to the bottom’ 7.3.3 Variations in Internationalization ‘eclectic’ paradigm: there are not simple models of MNC development, but rather a range of motives, related to ‘accidents of history’ and the particular path dependencies of individual firms, explain why and when internationalization occurs MNCs are particularly evident in 3 types of industry: High technology industries: pharmaceuticals, electronics Large volume, medium technology industries: motor vehicles Mass Consumer products: jeans, shirts These industries require high levels of technology and resources, but demand is highly variable 7.3.4 A ‘newer’ International Division of Labour and Changing Organizational Forms increasingly shifting strategy from setting up their own production facilities in developing countries to subcontracting work out to locally based firms Sunk Costs: the costs of investment that are not directly recoverable if a firm were to pull out of a particular location Globa
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